China struggles to help growing ranks of jobless

UNEMPLOYMENT The country's surplus labor pool in cities now tops the population of Australia, forcing China's leaders to scramble to keep a lid on protests

BLOOMBERG , BEIJING

Two-thirds of China's 22 million unemployed urban job seekers can't find work, an official report said, underlining the challenge China faces as it keeps the economy growing at triple the world's average.

At state companies alone, 9.1 percent of fired workers found work in the first six months of last year, down from half in 1998, the Economic Daily newspaper cited Economic and Trade Commissioner Li Rongrong (李榮融) as saying. Five million more jobs at 2,500 companies "that should exit the market" are also at risk, Li said.

PetroChina Co and other companies have shed hundreds of thousands of jobs to better compete with foreign rivals, forming a surplus labor pool in cities that now tops Australia's population of 20 million. In response, the newly installed leadership is pushing to increase welfare benefits and take other measures to in order to stem protests and maintain the Communist Party's 53-year grip on power.

Structural problems

"The economy grew 8 percent last year and is looking very strong, but underneath all that are some big structural problems," said Rob Subbaraman, an economist at Lehman Bros in Tokyo.

Leaders such as new party head Hu Jintao (胡錦濤), who is slated to replace Jiang Zemin (江澤民) as president in March, "recognize that these are problems that need to be dealt with today."

Li's comments came at a conference in the central Chinese city of Wuhan that focused on finding jobs for the unemployed, according to Economic Daily, which is controlled by the State Council, China's cabinet. Wuhan is the capital of Hubei province, an industrial area where Nissan Motor Co has a carmaking venture with Dongfeng Motor Corp.

Demonstrations

Rising unemployment has sparked protests throughout the country, as some of the 27 million workers fired from state-owned companies since 1998 take to the streets. Last March, at least 10,000 former workers at PetroChina's Daqing oilfield in northeastern China's Heilongjiang province protested for better benefits.

The government is encouraging fired workers to set up their own businesses. Last week the central bank said jobless workers could apply to borrow up to 20,000 yuan (US$2,416) from the state.

The loans could be interest-free if the businesses don't turn a profit.

This year, China's economy should create 9.5 million new jobs, the Xinhua news agency cited Labor Minister Zhang Zuoji (張左己) as saying last month. Still, jobless workers only get some of these positions.

Newcomers to the urban labor market include 2.12 million students expected to graduate from universities this year. Many of the 89.6 million "redundant" rural workers will be moved to cities to find work, the agriculture minister said, according to a People's Daily report last week.

China's official urban jobless rate stood at 3.9 percent in September, up from 3.6 percent at the end of 2001. The government admits the real rate is closer to 7 percent, when so-called "laid-off" workers at state-run factories are included. When migrants from the countryside are also added, the jobless rate climbs to above 10 percent, some economists say.

In the countryside, up to 140 million rural residents are "surplus" laborers, according to the World Bank.